Tucson and the War Biz

Since some of Tucson's largest employers are linked to defense, the area could reap an economic windfall.

While street vendors and other small businesses are suffering, Southern Arizona's largest enterprises have little to fear from war, at least from an economic point of view.

A look at the region's top employers shows how inextricably the local economy is linked to war and defense. Two of the top four employers are military, and one is a major weapons manufacturer.

The U.S. Army Intelligence Center and Fort Huachuca in Sierra Vista has 11,580 employees, making it the largest employer in the region, according to the Star 200, an Arizona Daily Star compilation of Southern Arizona's major employers, published March 9. Some 1,600 of the Center's intelligence troops have shipped out to Kuwait and Iraq.

No. 2 is the University of Arizona, with 11,335 employees. UA economist Marshall Vest said he does not know how many military contracts, if any, the university holds.

"Raytheon is our largest private employer," Vest said. "It has a huge local impact. It's a significant source of good-paying jobs." And because of a steady stream of federal dollars flowing into the company, it's "pretty much recession-proof. Their long-term contracts with the government are very large."

Along with Lockheed Martin and Boeing, Raytheon is a top weapons provider for the U.S. government. Its Tucson division manufactures a host of war material now being deployed in the Iraqi desert, from Tomahawk cruise missiles (costing $600,000 apiece), to AMRAAM missiles ($386,000) to the TOW wire-guided missile ($180,000).

"We're a $3 billion dollar company," spokeswoman Sara Hammond said, in terms of sales per year in the Tucson division. The 2002 Tucson payroll was $766 million, she said, with salaries averaging $75,841--he highest in Southern Arizona. Asked what economic benefit the war would provide to Raytheon, Hammond said, "It's not appropriate for us to comment. We're not going to do that."

Last week, Raytheon won a $173.7 million contract to keep making the Paveway II Laser Guided Bomb kits for the Air Force. But the contract was not related to the outbreak of war; it was a renewal of manufacturing agreement that has been in effect some 27 years. The new agreement covers fiscal 2003, but the $2 billion Paveway program is projected to continue through 2009.

Raytheon also recently landed an $80 million contract to manufacture "joint stand off weapons" and, with Lockheed-Martin, a $48.5 million deal for the Javelin Joint Venture, related to a weapons system that attacks tanks.

Because of such long-term contracts, the war is not likely to bump up the company's profits short-term. Hammond says Raytheon doesn't anticipate new hires any time soon. Sometime down the road, the company might get a direct benefit from this war, if it gets orders to replace weapons used up or destroyed in battle.

"It depends on how many missiles we blow up in that skirmish," Vest said. "(Raytheon) could see additional contracts in the long term."

Soldiers and airwomen and men shipped off to war get combat pay, giving the families left back home in Tucson and Sierra Vista a little extra spending money. But Vest said those new dollars would be far too small to have a real effect on the local economy.

"I expect that the war will be short and successful," Vest said. "Then we can all breathe a sigh of relief and get the economy going again."